Transmission of price changes in sawnwood and sawlog markets of the new and old EU member countries

In the European sawnwood markets, competition is tight between producer countries, with the new EU countries gradually gaining larger market shares. This paper focuses on the pass-through of sawnwood prices to supplier countries' national roundwood prices. Price-change effects on market shares are known to be large, but not so much is known about the timing and duration of price transmission between competitor countries. Our empirical analysis concerns the exports of four large sawnwood supplier countries in Europe (Finland, Austria, Estonia and the Czech Republic) to German markets, using quarterly panel data for 1995-2003. The transmission process was found to differ between countries, and the relationship was most clearly detectable between Finnish sawlog and sawnwood prices. Results based on seemingly unrelated regression analysis indicated that price transmission exhibits similarities between old (i.e. Austria, Finland) and new EU member countries (Estonia, Czech Republic). Overall developments in both sawnwood and sawlog prices displayed convergence in the study period, which indicates that deepening integration in European markets is also detectable in the forest sector.[PUBLICATION ABSTRACT]